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Thursday, March 03, 2016

Update on Global Public Cloud Computing Price Trends

There are a variety of reasons why senior executives and IT managers will choose to adopt cloud computing services. While a business transformation goal is often a high-priority for many, IT investment and operational cost reduction is also very important to most decision makers. Like any other significant procurement, buyers ultimately seek the best value for their IT spend.

451 Research released its latest assessment of the worldwide public cloud computing market, analyzing the variances in service pricing across the globe. The findings show that U.S. cloud service pricing is the most competitive globally, overall.

Moreover, on average, it typically costs between 7 percent and 19 percent more to host the same cloud application in Europe and 14 percent to 38 percent more in Asia-Pacific region -- the variance is usually due to the complexity of the cloud application. There are, however, other factors to consider.

Regional Assessment of Cloud Offerings

According to the 451 Research analysis, Latin America is currently the most expensive region in the world. It's typically 38 percent higher on average than the U.S. with a far greater variation in prices, partly due to the fact that there's a limited selection of cloud service providers in the region.

451 Research also announced that its 'Cloud Price Index' has dropped by 6 percent since October 2015. While this is likely to be good news for many users, 451 Research analysts note that it is nowhere near the double-digit drop that some buyers might expect, given the prior trends in the marketplace.

451 Research encourages buyers to consider the costs of all their cloud services, not just virtual machines. For example, the object storage price has remained at about the same level for 18 months, and because of the explosion of data created within many organizations, they believe optimal storage will become a concern for more users.


Despite the average premium pricing outside the U.S. market, the study unearthed one cloud provider that bucked the trend by offering services in Europe and Latin America that are actually less expensive -- by comparison -- than the average U.S. price for the same services.

Overall, the range of costs reflects a higher premium for complex large applications -- composed of compute, storage, networks and technical support -- when compared to simpler virtual machine scenarios.

451 Research analysts believes that these discrepancies may be due to previously reported cloud architect skills shortages, compounded by an SME market that's willing to pay more for knowledgeable technical support services when implementing somewhat complex applications.

Growing Demand for Hybrid IT Flexibility

CIOs pay what analysts refer to as a 'protection premium' to use in-country or in-region services -- rather than the cheaper option of U.S. originated services -- to ensure compliance with local regulations; to improve performance by bringing applications closer to users; and to take advantage of local customer service.

In Europe, the biggest driver of local cloud demand is data protection legislation. Uncertainty about who has access and who has responsibility for data sovereignty is confusing to both cloud buyers and service providers. 451 Research analysts believe local cloud service demand will continue, given the uncertainty around Safe Harbor, the Patriot Act and the new US-EU Privacy Shield agreement.

“When evaluating cloud providers, enterprises should consider how they will take advantage of variances in prices in the short and long-term to cut costs. This means being aware of the real impact of price-cuts and understanding geographical differences," said Dr. Owen Rogers, research director at 451 Research.

451 Research analysts found one provider charged more than twice the average U.S. price for hosting in Latin America, while another offered an 11 percent discount for hosting in Europe compared to the U.S. market. Due diligence can be very rewarding. The global market for cloud is complex and cloud service buyers need to understand typical pricing to properly evaluate their options and negotiate with suppliers.